The British holiday carrier Monarch Airlines is plotting a radical overhaul of its strategy at the same time that it holds talks with regulators about the annual extension of its tour operator’s licence.
Sky News has learnt that Monarch, which is expected to carry more than six million passengers this year, is working with KPMG on options for the sale or restructuring of its short-haul business through a joint venture or feeder deal with another airline.
The plan is understood to have been under consideration for several months, and would see Monarch attempting to shift its strategy to more profitable long-haul flights in the wake of a brutal European price war.
Sources said that Monarch was keen to seal a new tie-up shortly, even as the Civil Aviation Authority (CAA) is reviewing whether to renew the Air Travel Organiser’s Licence (ATOL) required by package holiday providers at the end of the month.
In a statement, a Monarch spokesman said: “In recent months we have undertaken, and continue to undertake, a comprehensive review of Monarch designed to determine its optimal future shape, size and strategy.
“We are having regular discussions on a number of options with potential strategic partners and we will announce any material developments, if and when they happen.”
The latest potential overhaul of Luton Airport-based Monarch comes a year after the airline secured a £165m rescue package led by Greybull Capital, its controlling shareholder, and Boeing, the aircraft manufacturer.
Image: Likely candidates to acquire or enter into a joint venture with Monarch may include EasyJet and Jet2
A person close to the carrier said it was engaged in “positive discussions” about its short-haul operations, but denied that the entire company, which employs more than 2,500 people, had been put up for sale by Greybull.
Likely candidates to acquire or enter into a joint venture with Monarch could include EasyJet or Jet2, although it was unclear on Monday whether they were part of the process being run by KPMG.
While the package holiday business represents only about 5% of Monarch’s revenues, the renewal of its ATOL licence is nevertheless regarded as an important milestone for the company.
The CAA is thought to be monitoring Monarch closely following the delay to last year’s ATOL renewal.
A CAA spokesman said: “We do not comment on the financial situation of any individual ATOL travel companies.”
Monarch’s most recent financial statements revealed accounting losses for the year to last October of £317m, although much of this related to aircraft leasing contracts.
The company is also expected to lose money this year amid difficult trading after terrorist attacks in European markets such as Spain, which counts as a key destination for Monarch.
A significant element of the rescue deal secured a year ago was a revised fleet purchasing agreement with Boeing for 45 new aircraft.
Under their restructured purchase agreement, Monarch can enter into sale-and-leaseback arrangements for the planes, which are expected to come into service from next spring.
Monarch’s chief executive, Andrew Swaffield, reacted angrily last month to a suggestion made by Michael O’Leary, Ryanair’s combative boss, that the British airline would struggle to make it through the winter.